On February 4th, State financial regulators cited Buffalo-based Hunt Mortgage Corp. (Hunt) for weakness in lending to minorities and minority neighborhoods, as they released a report finding an overall lack of lending by nonbank mortgage companies in Buffalo, despite laws banning the practice of redlining. Hunt is a subsidiary of Hunt Real Estate Corp., the region’s No. 2 real estate brokerage firm, and by extension a major provider of mortgages for its brokerage customers.  The report by the State Department of Financial Services (DFS) found a “distinct lack of lending” by mortgage lenders – particularly nonbanks – in Buffalo, which remains one of the most segregated cities in America. According to the report, while 17% of the region’s population is Black or Hispanic, just under 10% of the loans went to minority borrowers, based on data from 2016 to 2019 provided under the Home Mortgage Disclosure Act (HMDA).  And nonbank lenders lent money in mostly minority neighborhoods at a lower rate than banks.

State regulators found that several lenders “made little to no effort” to do business in those neighborhoods. Those lenders also did not track “whether or how well” they serve minority populations, and do not have “adequate fair lending compliance programs,” the report found.

While the agency did not find evidence that Hunt violated any laws, it did find that the company’s compliance programs, and fair lending efforts had weaknesses. And the department suggested that a “lack of sufficient attention to fair lending issues contributed to the company’s poor performance in lending to people of color and in majority-minority neighborhoods.”

Mortgage lending is increasingly dominated today by nonbank lenders, which originated 37% of the mortgages in Buffalo and more than half nationwide from 2016-2019. Unlike banks, they are not subject to the federal or state Community Reinvestment Act. The report recommended that the state law be extended to nonbanks, and also called for federal bank regulators to investigate banks under their purview for fair lending violations in Buffalo.

The agreement with Hunt followed a review of the company’s publicly available data for lending in Buffalo and Syracuse from 2016 through 2019. DFS found that Hunt originated 4,123 residential loans in the Buffalo metropolitan area, but only 4.71% or 194 loans were to Black or Hispanic applicants. Also, only 91 loans or 2.21% were made to purchase properties in mostly minority areas, and only 23 of those went to a minority applicant.

In Syracuse, Hunt originated 880 loans in the same time period. Of those, 43 or 4.89% went to a Black or Hispanic applicant, while 14 or 1.59% went for a purchase in a minority neighborhood, and only three of those were to a minority borrower. Those numbers prompted a more formal investigation into the firm’s practices, procedures, and compliance, including its marketing materials and policies and its underwriting, DFS said.

As part of the settlement, Hunt will evaluate its compliance and update its policies and procedures, while also clearly defining its mortgage service area to include the Buffalo, Rochester, and Syracuse metropolitan areas. It will introduce credit and pre-application counseling, and a consumer complaint policy. It will also direct 25% of its marketing and advertising to minorities and minority neighborhoods and will track those efforts. And it will spend $50,000 on outreach and promotions designed to reach those applicants, including posters, billboards, brochures, direct mail, and online advertisements, as well as specific in-person events as allowed under the pandemic.

The state said that Hunt, also, in “a good faith effort,” agreed to develop a special financing program to provide $150,000 in discounts or subsidies on loans for properties in mostly minority communities and provide annual training in fair lending practices to its employees and agents, and to conduct an annual compliance audit of its fair lending efforts.